Greek Default

[Palantir]

@ohai

Maybe you haven’t been following so closely. Anyway, the “moral hazard” is related to bailouts, not market rate loans, on which Greece has not had to rely on since 2012 or earlier. The market interest rate on Greek loans would probably have been some astronomical 30% or higher. However, Greece receives financial assistance from the EU (in plurality funded by ze Germans), as well as the IMF, in the form of loans with long maturities and very low interest rates. The same applies to Portugal, Spain, or other very indebted EU nations. The ECB has distorted the supply of funds such that “market rates” are inapplicable in many cases.

There is a moral hazard because EU nations that are in poor fiscal health have come to expect bailouts from the EU; the consequences of their fiscal irresponsibility have been lessened. Furthermore, the recent actions by the Syriza party defy the agreements on austerity that were negotiated by the preceding “technocrat” government. Not only is there a fear of EU countries expecting to be bailed out, but there is a danger that they will not adhere to the conditions that accompany these bailouts.

Fair enough, I am humbled.

[Greenman72]

Didn’t Milton Friedman predict that the Euro wouldn’t last ten years? Although he was wrong about the time frame, we’re starting to understand his point.

[_Oscar]

@Palantir

@ohai

Maybe you haven’t been following so closely. Anyway, the “moral hazard” is related to bailouts, not market rate loans, on which Greece has not had to rely on since 2012 or earlier. The market interest rate on Greek loans would probably have been some astronomical 30% or higher. However, Greece receives financial assistance from the EU (in plurality funded by ze Germans), as well as the IMF, in the form of loans with long maturities and very low interest rates. The same applies to Portugal, Spain, or other very indebted EU nations. The ECB has distorted the supply of funds such that “market rates” are inapplicable in many cases.

There is a moral hazard because EU nations that are in poor fiscal health have come to expect bailouts from the EU; the consequences of their fiscal irresponsibility have been lessened. Furthermore, the recent actions by the Syriza party defy the agreements on austerity that were negotiated by the preceding “technocrat” government. Not only is there a fear of EU countries expecting to be bailed out, but there is a danger that they will not adhere to the conditions that accompany these bailouts.

Fair enough, I am humbled.

Agree totally with Ohais argumentation.

However, thinking the matter through there is an interesting point here when it comes to Moral Hazard.

In 2009 at the start of the crisis the majority of the Greek debt was burdened on mostly German and French banks. The first rescue packages where merely a transfer of debt from these banks to the European taxpayers. Consequently, almost the total debt of Greece is now with public European institutions and governments.

The fundamental question here is: Who was bailed out at the expense of whom?

[itera]

The pro-bailout argument for Germany is

1. Germany owns a ton of Greek debt, so defaulting on all that actually comes back to screw Germany

2. kicking out weak EU countries makes the Euro stronger and stronger which begins to kill German exports, because it gets really expensive to buy their goods

[Black_Swan]

@itera

The pro-bailout argument for Germany is

1. Germany owns a ton of Greek debt, so defaulting on all that actually comes back to screw Germany

2. kicking out weak EU countries makes the Euro stronger and stronger which begins to kill German exports, because it gets really expensive to buy their goods

You’re missing the main reason.

Bailing out Greece will publically reinforce the commitment to the Euro which relies on implied support. Otherwise, in theory if the situation deteriorates in Spain or Portugal you could see a quicker rush for spreads to widen which becomes in many cases a self-fulfilling prophecy as nations get stuck in a debt cycle fueled by elevated rates and low liquidity.

Before you come back to debate, I do understand the risk of moral hazard and am not advocating one direction over the other. Each has it’s drawbacks, I honestly do not know what the right move is for Germany in this situation. I said earlier in either this thread or another that the minute Greece committed to brinksmanship, they essentially left the Euro in a lose-lose situation.

[itera]

@Black_Swan

@itera

The pro-bailout argument for Germany is

1. Germany owns a ton of Greek debt, so defaulting on all that actually comes back to screw Germany

2. kicking out weak EU countries makes the Euro stronger and stronger which begins to kill German exports, because it gets really expensive to buy their goods

You’re missing the main reason.

Bailing out Greece will publically reinforce the commitment to the Euro which relies on implied support. Otherwise, in theory if the situation deteriorates in Spain or Portugal you could see a quicker rush for spreads to widen which becomes in many cases a self-fulfilling prophecy as nations get stuck in a debt cycle fueled by elevated rates and low liquidity.

Before you come back to debate, I do understand the risk of moral hazard and am not advocating one direction over the other. Each has it’s drawbacks, I honestly do not know what the right move is for Germany in this situation. I said earlier in either this thread or another that the minute Greece committed to brinksmanship, they essentially left the Euro in a lose-lose situation.

You’re analyzing what I said way too much. reminds me of a past ex. who was way to emotional about everything.

Good thing i dumped her azz fast

[igor555]

@itera

@Black_Swan

@itera

The pro-bailout argument for Germany is

1. Germany owns a ton of Greek debt, so defaulting on all that actually comes back to screw Germany

2. kicking out weak EU countries makes the Euro stronger and stronger which begins to kill German exports, because it gets really expensive to buy their goods

You’re missing the main reason.

Bailing out Greece will publically reinforce the commitment to the Euro which relies on implied support. Otherwise, in theory if the situation deteriorates in Spain or Portugal you could see a quicker rush for spreads to widen which becomes in many cases a self-fulfilling prophecy as nations get stuck in a debt cycle fueled by elevated rates and low liquidity.

Before you come back to debate, I do understand the risk of moral hazard and am not advocating one direction over the other. Each has it’s drawbacks, I honestly do not know what the right move is for Germany in this situation. I said earlier in either this thread or another that the minute Greece committed to brinksmanship, they essentially left the Euro in a lose-lose situation.

You’re analyzing what I said way too much. reminds me of a past ex. who was way to emotional about everything.

Good thing i dumped her azz fast

[Black_Swan]

I’m sure she rues the day she missed out on the bitter man who crusades the internet compensating with a hacksaw agenda.

[ohai]

But now who will pay for her sister’s medical school?

[system]

Well, Tsipras says there will be a deal by the end of the week, and that it will take ‘grexit’ off the table. So, everyone still talking, everyone still wants a deal, and the clock is ticking now. Also, now that they conveniently kicked the guy who can do math out of the room, a bad deal is possible.

[itera]

My favorite part of today’s meeting in Brussels was Tsipras walking into the emergency summit meeting basically empty handed with no new substantive proposal. just walked in and was like “yea that’s right, we voted down your proposal. Now give me my money.” LOL

Greece now wants 7Bn euros as a “bridge-loan” until they negotiate another deal later.

Now they’re saying “oh. uhhh. yea you’ll have it end of week”.

This coming Sunday is basically the final deadline. yea, good luck with that

[itera]

@Black_Swan

I’m sure she rues the day she missed out on the bitter man who crusades the internet compensating with a hacksaw agenda.

oh yes, that reminds me, she also complained like a whiny school kid. Good thing we didn’t have a oops preggo moment.

[system]

@itera

My favorite part of today’s meeting in Brussels was Tsipras walking into the emergency summit meeting basically empty handed with no new substantive proposal. just walked in and was like “yea that’s right, we voted down your proposal. Now give me my money.” LOL

Yeah, it is rather hilarious.

Generally the smarter people author the deal and say “sign here please”. Then later he can claim he didn’t know what he was signing.

[Black_Swan]

@itera

@Black_Swan

I’m sure she rues the day she missed out on the bitter man who crusades the internet compensating with a hacksaw agenda.

oh yes, that reminds me, she also complained like a whiny school kid. Good thing we didn’t have a oops preggo moment.

Cool story bro.

In other news, my initial point still stands uncontested and you’re still an idiot.

[igor555]

so Greece wants a 3 year loan and promises to make reforms…i think i have heard that before

[Bremen74]

… not even a fixed loan, but a facility. And it seems they didn´t mention a volume yet!

[CFALOBO]

@Bremen74

… not even a fixed loan, but a facility. And it seems they didn´t mention a volume yet!

Big mistake by the EU if they agree. It’s time for Greece to exit.

Greek austerity is almost as bad as Angelina Jolie’s accent in Alexander…

[Sweep_the_Leg]

@CFALOBO

@Bremen74

… not even a fixed loan, but a facility. And it seems they didn´t mention a volume yet!

Big mistake by the EU if they agree. It’s time for Greece to exit.

Greek austerity is almost as bad as Angelina Jolie’s accent in Alexander…

What an amazingly random pull that was.

[igor555]

[system]

^ Makes sense.

The financially enslaved work, to make us money.